Write the equation you would use in excel to find the present value of the following...
Write the equation you would use in excel to find the present value of the following cash flows assuming the required return was 10%/year and the long term perpetual growth rate in cash inflows post 68 months is 3%/year:
| A | B | C | D | E | F | G | |
| 1 | Time 0 | 8 Months | 20 Months | 32 Months | 44 Months | 56 Months | 68 Months |
| 2 | -$200 m | $40 m | $80 m | $120 m | $140 m | $180 m |
Homework Answers
Monthly ROR=10%/12=0.833%
Monthly Growth Rate=3%/12=0.25%
Terminal Cash Flow=180*(1+0.25%)/(0.833%-0.25%)=30951.97
So the Present Value of all the cash flow=
-200/(1+0.833%)^8 + 40/(1+0.833%)^20 + 80/(1+0.833%)^32 + 120/(1+0.833%)^44 + 140/(1+0.833%)^56 + 180/(1+0.833%)^68 + 30951.97/(1+0.833%)^69=$17644.11
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